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BA Spending Daily December 6, 2012



Spending Daily | December 6, 2012

“McConnell: Go ahead and try to pass Obama fiscal cliff plan”
Politico reports, “Senate Republican Leader Mitch McConnell on Wednesday called for a vote on what he called President Obama’s ‘laughable’ fiscal cliff plan. But Majority Leader Harry Reid quickly objected – another sign that the two sides are more interested this week in political theater than substantive talks. In an exchange on the floor, McConnell said Reid’s response indicated the president’s proposal for averting the fiscal cliff had little support among congressional Democrats. The plan, delivered to Capitol Hill last week by Treasury Secretary Timothy Geithner, called for $1.6 trillion in tax hikes,$400 billion in spending cuts and economic stimulus measures, and would give Obama authority to raise the debt ceiling. “

Geithner to GOP: Agree to Higher Taxes or We’ll “Absolutely” Go Over the Cliff
The Associated Press reports, “The administration is taking a tough line on the ‘fiscal cliff’ at the same time President Barack Obama resumes contact with House Speaker John Boehner over ways to avert across-the-board spending cuts and tax increases at the turn of the year. The administration will ‘absolutely’ let the double whammy take effect as scheduled unless Republicans give in to Obama’s demand to raise tax rates at upper income levels, Treasury Secretary Tim Geithner said Wednesday. … It wasn’t the only demand from the administration on a day Obama telephoned Boehner, the first known discussion of the fiscal cliff between the two in several days. The president, appearing before corporate CEOs, warned Republicans not to inject the threat of a government default into negotiations over the fiscal cliff as a way of extracting concessions on spending cuts.”

Flashback: “Obama: Defense sequester ‘will not happen'” (Lori Montgomery, Washington Post, 10/22/12)

As “skilled procrastinators,” Congress Not Worried on Fiscal Cliff Solution
The Associated Press reports, “The dealmakers who warn that a year-end plunge off the ‘fiscal cliff’ would be disastrous don’t seem to be rushing to stop it. Why aren’t they panicking? For one thing, the Dec. 31 deadline is more flexible than it sounds. Like all skilled procrastinators, from kids putting off homework to taxpayers who file late, Washington negotiators know they can finagle more time if they need it. That doesn’t mean delay would be cost-free. Stock markets might tank if 2013 dawns without a deal. … The Obama administration would have power to delay some of the tax increases and spending cuts that would officially take effect as January begins. Then, if an agreement is reached early in the year, it could be applied retroactively to wipe them out.”

Pentagon Warned: Prepare To Go Over Cliff
Reuters reports, “The Pentagon said on Wednesday the White House budget office has directed it to begin planning how to implement billions of dollars in across-the-board spending reductions if Congress and the president fail to agree to avert the cuts before January 2. The decision reversed the Pentagon’s yearlong position that it was not planning for the automatic cuts, known assequestration. The cuts were included in last year’s Budget Control Act because officials thought the process was so onerous it would force rival politicalparties to compromise. … ‘Naturally we hope very much that sequestration will be avoided,’ Little said. ‘We don’t want to go off the fiscal cliff, but in consultation with OMB we think that it is prudent at this stage to begin atleast some limited internal planning.’”

Going Over the Cliff and Hitting the Ceiling?
The Associated Press reports, “The political fight that took the nation to the verge of defaulting on its debts last year is back, overshadowed by ‘fiscal cliff’ disputes but with consequences far graver than looming tax hikes and steep spending cuts. The government is on track to hit its $16.4 trillion borrowing limit later this month. And while the Treasury can keep the government functioning through early next year, President Barack Obama is bluntly insisting that any deal on the fiscal cliff include an end to brinkmanship on the debt ceiling.”

Debt Ceiling Debacle Déjà Vu 
The New York Times editorializes, “Republicans clearly sense that they are being outmaneuvered in the fiscal talks by the Obama administration, unable to stop the inevitable rise in tax rates for the rich. But they have one last card to play and they intend to use it, knowing it will endanger economic progress: They are threatening once again to default on the credit of the United States if President Obama doesn’t do their bidding. Party officials say that if they do not reach an acceptable deal with the White House this month, they will wait until the country reaches the debt ceiling early next year, then refuse to lift it until they get their way on cuts to spending and taxes, The Times reported on Wednesday.”

Billions of Savings in Farm Bill?
According to the New York Times, “As President Obama and Republican leaders try to avoid automatic spending cuts and tax increases beginning in the new year, several lawmakers say a stalled farm bill that reshapes nutrition and agriculture programs could contribute billions of dollars in savings. Senator Debbie Stabenow, Democrat of Michigan and chairwoman of the Senate Agriculture Committee, and Representative Frank D. Lucas, Republican of Oklahoma and chairman of the House Agriculture Committee, are trying to persuade administration and Congressional leaders to include the measure in negotiations that are seeking to avoid more than $500 billion in tax increases and more than $100 billion in automatic spending cuts that would go into effect next year. Both lawmakers have sponsored versions of a farm bill with steep spending cuts that would help with deficit reduction, they said.”

Federal Gov’t Reduces Contract Spending by $20B
The Washington Post reports, “The White House budget office on Thursday reported the federal government had reduced contract spending by 4 percent in the past fiscal year, an accomplishment that it said was the largest drop for a single cycle on record. The Obama administration said it cut contract spending by more than $20 billion during fiscal 2012, largely by increasing coordination betweeen agencies — buying together instead of independently. Contracts accounted for about 14 percent of all federal government spending during the past cycle, representing the lowest level since 2003. … Federal contract spending for fiscal 2012 was 6 percent below the fiscal 2009 level, representing a rare drop between the start and the end of a presidential term. The federal government’s contract spending grew every year during President George W. Bush’s administration, but the raw numbers never exceeded the heights reached during most of Obama’s first term.”

Analysis: The Middle Class Won’t Escape Obama’s Tax Hike
Caroline Baum editorializes in Bloomberg, “If I were to learn on Dec. 31 that my taxes are going up next year, I would do … absolutely nothing. Granted, I’m a salaried employee, not an entrepreneur or small-business owner. … The effects of higher tax rates may not be apparent in the short run, according to Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University in Arlington, Virginia. But they manifest themselves over a lifetime: in our next job choice, in perhaps electing to join the underground economy and in deciding when to retire. … Don’t confuse U.S. President Barack Obama’s ‘tax fairness’ with real revenue. ‘About three-quarters of the revenue loss from the Bush tax cuts came from everything below the top two brackets,’ said Michael Darda, chief economist at MKM Partners LLC in Stamford, Connecticut. … ‘Higher marginal tax rates prevent poor people from becoming rich,’ he said. ‘The only way they can get rich is by earning income, which is taxable. Once you become rich, you have ways around it.’”

Bobby Jindal: A Nation $16 Trillion in Debt Has Already Gone Off The Cliff
Gov. Bobby Jindal Editorializes in Politico, “As the nation eagerly awaits Washington’s solution to the so-called fiscal cliff, and as the negotiations continue back and forth in both the media and in reality, here are a few thoughts for consideration. Today it’s the fiscal cliff, but that surely will not be the end of it; next year it will be the fiscal mountain, after that the fiscal black hole, and after that fiscal Armageddon. But the truth is Washington already drove us off the fiscal cliff while no one was looking. A nation that has a $16.3 trillion debt, a debt that is larger than our entire economy, has already driven through the guard rail and is in free fall with the cliff somewhere in the rear view mirror.” Read more…

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